CSG’s $40m raising raises eyebrows

CSG’s move to raise $40 million of new equity through an institutional placement and pro rata entitlement offer had taken some investors by surprise, the chief executive of the technology services company,
Denis Mackenzie
, concedes.

CSG
entered a trading halt yesterday morning and said the proceeds of the raising would be used to help meet coming contracted capital payments of $43.6 million and to ensure it retained a prudent level of debt and funding headroom for operational flexibility.

“It is all about paying down existing debt, consolidating our balance sheet and putting the business in a very strong financial position," Mr Mackenzie said. “We have had a number of impacts on the business over the last five months, including the floods in Brisbane and the earthquakes in Christchurch.

“Buildings of ours got flooded and fell down.

“When events are added together they are significant. This raising will put us back in a very strong financial position."

The company’s earnings performance has been subject to dramatic changes in the past year.

Its recent half-yearly results showed a 53 per cent increase in net profit to $18.8 million and a 67 per cent rise in revenue to $186.4 million. However, this was largely because the company tripled in size through acquisition.

It added 10,500 service contracts from Canon, which led to the opening of new premises in Sydney, Melbourne, Perth, Adelaide and Canberra.